Conyers and Berman Introduce Bill to
Criminalize Placing Copyrighted Works on P2P Networks

7/16. Rep. John Conyers (D-MI)
and others introduced
HR 2752,
the "Author, Consumer, and Computer Owner
Protection and Security (ACCOPS) Act of 2003". The bill would amend the
Copyright Act and the criminal code to protect digital works from online
infringement. It would criminalize the unauthorized placement of copyrighted
works on P2P networks, and criminalize offering certain P2P software without first
giving notice of the privacy and security risks. It would also criminalize
registering a domain name with false information with intent to defraud, and
provide that registering a domain name with false information shall be
considered evidence of willfulness with respect to infringement committed with
that domain name. The bill also calls for increased cooperation between the U.S.
and foreign prosecutors, and authorizes appropriations for investigation and
prosecution of copyright crimes.

Rep.
Conyers (at right) explained in a statement submitted for the Congressional
Record that "Those who invest so much into developing software, books,
music, and movies and rely upon sales of that content are being deprived of
their livelihoods because people are taking advantage of the Internet to obtain
and share digital content for free." See, Congressional Record, July 16,
2003, at page E1496.

Rep. Conyers, who is the ranking Democrat on the full Committee, continued
that "While there are laws on the books that protect copyrighted content from
theft, they do not go quite far enough. Despite court decisions ordering various
file swapping sites to shut down, new file-swapping programs and new
file-swapping sites appear every day on the Internet, each one better than its
predecessor. These sites do not develop their own content; instead, they rely
upon the success and popularity of content created by others and allow that
content to be distributed to millions with the single click of a mouse. These
sites also create security and privacy risks, in that they open up entire the
hard drives average consumers for the world to see, financial and personal
information included."

Criminalization of Placing Copyrighted Works on Certain Computer Networks.
One of the key provisions of the bill would criminalize putting copyrighted
works on certain computer networks. Courts have held recently that individuals
who put copyrighted songs on peer to peer (P2P) networks commit civil copyright
infringement. See, for example,
A&M
Records v. Napster, 239 F.3d 1004 (9th Cir. 2001). However, the standard for
establishing criminal copyright infringement is higher. This bill would make
clear that this sort of P2P infringement can constitute criminal conduct.

Currently, criminal infringement requires either (1) the purpose of
"commercial advantage or private financial gain", or (2) "reproduction or
distribution, including by electronic means ... of ... copyrighted works, which
have a total retail value of more than $1,000". P2P infringers would not meet
the first requirement. While they might meet the second requirement, prosecution
would be difficult.

"Any person who infringes a copyright willfully either --
(1) for purposes of commercial advantage or private financial gain, or
(2) by the reproduction or distribution, including by
electronic means, during any 180-day period, of 1 or more copies or
phonorecords of 1 or more copyrighted works, which have a total retail value
of more than $1,000,

shall be punished as provided under section 2319 of title 18, United
States Code. For purposes of this subsection, evidence of reproduction or
distribution of a copyrighted work, by itself, shall not be sufficient to
establish willful infringement."

Title 18 is the criminal code.
18 U.S.C. § 2319 pertains to criminal
infringement of copyright. Subsection 2319(a) provides that "Whoever violates
section 506(a) (relating to criminal offenses) of title 17 shall be punished as
provided in subsections (b) and (c) of this section and such penalties shall be
in addition to any other provisions of title 17 or any other law." (Parentheses
in original.)

In turn, Subsection 2319(b) provides, in part, that "Any person who commits
an offense under section 506(a)(1) of title 17 -- (1) shall be imprisoned not more
than 5 years, or fined in
the amount set forth in this title, or both, if the offense consists of the
reproduction or distribution, including by electronic means, during any
180-day period, of at least 10 copies or phonorecords, of 1 or more
copyrighted works, which have a total retail value of more than $2,500;".

HR 2752 would add the following language to 17 U.S.C. § 506(a): "For
purposes of section 2319(b) of title 18, the placing
of a copyrighted work, without the authorization of the copyright owner, on a
computer network accessible to members of the public who are able to copy the
work through such access shall be considered to be the distribution, during a
180-day period, of at least 10 copies of that work with a retail value of more
than $2,500."

Rep. Berman described
this provision of the bill at a hearing on July 16. The hearing was not on
HR 2752. Rather, it was on
HR 2517,
the "Piracy Deterrence and Education Act of 2003", sponsored by
Rep. Lamar Smith (R-TX) and Rep.
Berman. HR 2517 would
enhance the government's resources for prosecuting intellectual property rights
(IPR) crimes,
and involve the Federal Bureau of Investigation
(FBI) and Department of Justice (DOJ) in
educating and warning the public regarding internet based copyright
infringement. See, TLJ
story titled "House CIIP Subcommittee Holds Hearing on
Piracy Deterrence and Education Act", July 18, 2003. That is, HR 2517 would
expand enforcement of existing IPR related criminal statutes, while HR 2752
would expand the scope of IPR related conduct that constitutes crimes.

Rep. Berman first praised HR 2517, regarding enforcement. But he added,
"I think more can be done." He then launched into a long explanation of
HR 2752, and why he believes that it is necessary.

For example, he addressed the section that criminalizes putting certain works
on P2P networks. He stated that
"Section 301 of that bill clarifies that the uploading of a single
copyrighted work to a publicly accessible computer network meets the 10 copy,
$2,500 threshold for felonious copyright infringement. Section 301 simply brings
the law into accord with the reality that uploading a copyrighted work to a
place from which millions can download it is equivalent to the distribution of
ten or more copies having a value of $2,500. We do this because some prosecutors
appear skeptical that they can successfully pursue cases against many uploaders
of copyrighted works, otherwise."

Registering Domain Names with False Information. The bill also
contains two provisions relating to the use of false contact information when
registering domain names.

First, the bill would add a new Section 1037 to Title 18, that would provide,
in part, that "Whoever knowingly and with intent to defraud provides material
and misleading false contact information to a domain name registrar, domain name
registry, or other domain name registration authority in registering a domain
name shall be fined under this title or imprisoned not more than 5 years, or
both."

Second, the bill would further amend Section 506 of Title 17 regarding
evidence of willful infringement. It would add the following: "The knowing and
intentional provision of material and misleading false contact information to a
domain name registrar, domain name registry, or other domain name registration
authority in registering a domain name shall be considered evidence of
willfulness with respect to infringements committed by the domain name
registrant through the use of that domain name."

Rep. Berman addressed the second of these two provisions on July 16. He stated that
"Section 305 addresses the all too common phenomenon of operators of
copyright infringing websites providing false domain name registration
information. If the illegal activities on the web site attract the attention of
law enforcement or right holders, the operators often disconnect it, and pop up
elsewhere, under another domain name, with different contact information.
Section 305 directs the courts to consider the knowing and intentional provision
of materially false domain name registration as evidence of willfulness with
regard to copyright infringements."

Consumer Privacy and Security. The bill would add a new Section 1822 to
Title 18 that provides that "Whoever
knowingly offers enabling software for download over the Internet and does not
(1) clearly and conspicuously warn any person downloading that software, before
it is downloaded, that it is enabling software and could create a security and
privacy risk for the user's computer; and (2) obtain that person's prior consent
to the download after that warning; shall be fined under this title or
imprisoned not more than 6 months, or both."

The bill also defines "enabling software" as "software that, when installed
on the user's computer, enables 3rd parties to store data on that computer, or
use that computer to search other computers' contents over the Internet."

Rep. Berman stated that "Section 302 addresses the well documented concern
that popular peer to peer
software programs sometimes allow third parties to hijack personal computers to
distribute child pornography and copyright infringing material, come bundled
with spyware, and otherwise jeopardize the privacy and security of PC owners.
Section 302 requires that PC owners receive clear and conspicuous notice, and
provide consent prior to downloading software, that would allow third parties to
store material on the personal computer, or use that personal computer to search
for material on other computers."

This issues of privacy and security of P2P networks has been addressed at
previous Congressional hearings.

The Senate Judiciary
Committee held a hearing on June 17, 2003 titled "The Dark Side of a Bright
Idea: Could Personal and National Security Risks Compromise the Potential of
Peer to Peer File Sharing Networks". See, story titled "Senate Committee Holds
Hearing on P2P Networks" in TLJ Daily E-Mail Alert No. 683, June 18, 2003.

At this hearing witnesses praised the benefits of P2P networks, but also
cautioned about threats that they pose to the privacy and security of
individuals' sensitive records, and to the security of sensitive government
records. Witnesses also discussed the problem of pormography on P2P networks that is
often disguised a popular music files, thus causing children to unwittingly be
exposed.

Other Provisions. The bill would authorize the appropriation of "not
less than $15,000,000" for investigation and prosecution by the Department of
Justice of violations of Title 17, which codifies copyright law.

The bill provides for increased information sharing by the Department of
Justice with foreign law enforcement authorities to assist their enforcement of
their copyright laws. Rep. Berman stated on July 16 that "Section 201
addresses the unique law enforcement challenge posed by the
increasingly transnational character of online copyright infringement. In order
to insure that the road across the border does not become an investigation dead
end, Section 201 requires the Attorney General to assist the appropriate foreign
authority in making a case against such online infringers."

Finally, the bill would amend 17 U.S.C. § 506 to provide that criminal copyright
infringement includes copying "by the unauthorized reproduction or recording of
a motion picture as it is being performed or displayed in a motion picture
theater".

The resolution states that "Congress disapproves the rule submitted by the
Federal Communications Commission relating to broadcast media ownership (Report
and Order FCC 03-127, received by Congress on July 10, 2003), and such rule
shall have no force or effect." (Parentheses in original.)

The FCC announced the Report and Order on June 2, and released it on July 2.
See also, stories titled "FCC Announces Revisions to Media
Ownership Rules" and "Reaction to the FCC's Media Ownership Announcement"
in TLJ
Daily E-Mail Alert No. 672, June 3, 2003, and story titled "FCC Releases
Media Ownership Order and NPRM" in TLJ Daily E-Mail Alert No. 692, July 7, 2003.

Sen.
Dorgan (at right) stated in a release that "We are moving to roll back one of
the most complete cave-ins to corporate interests I've ever seen by what is
supposed to be a federal regulatory agency ... The FCC's decision on June 2
advanced big corporate interests, and did so at the expense of the public
interest. They chose concentration over competition. They chose few voices over
many voices. In a democracy which relies on the free exchange of many voices,
that was the wrong choice."

Sen. Russ Feingold (D-WI), a
cosponsor of the resolution, stated that "By invoking the Congressional Review
Act, Congress can wipe out these new rules altogether, and the FCC will have to
go back and redraft them. We plan to make it clear that the new draft should
include some of the positive proposals contained in the recent media bill
sponsored by Senator Ted Stevens that passed out of the Commerce Committee. The
CRA specifically contemplated that agencies may have to redo regulations
required by court or congressional mandate. If this disapproval resolution is
passed by the House and the Senate, the preexisting rules will again be in
effect until the FCC goes back to the drawing board and promulgates new
regulations that are not substantially similar to the rules that Congress has
disapproved." See, Congressional Record, July 16, 2003, at page S9490.

On June 19, 2003, the Senate
Commerce Committee amended and passed
S 1046, the
"Preservation of Localism, Program Diversity, and Competition in Television
Broadcast Service Act of 2003". The bill, as amended, would roll back some of
the changes to the FCC's media ownership rules. The bill is sponsored by
Sen. Ted Stevens (R-AK). See,
TLJ story
titled "Senate Commerce Committee Passes Media Ownership Bill", June 19, 2003.

Secretary Evans Releases Proposed Bill to Place NTIA,
NIST and Other Entities in One Administration

7/17. Secretary of Commerce
Donald Evans sent a proposed bill to the
Congress that would reorganize several, but not all, of the technology related
entities at the Department of Commerce (DOC)
into one unit. See,
documents [11 pages in PDF] sent to Congress (cover letter, draft of
proposed bill, and Statement of Purpose and Need). See also,
DOC question and answer
document [4 pages in PDF].

The bill provides that "There is established in the Department of Commerce
a Technology and Telecommunications Administration. The Technology and
Telecommunications Administration shall include --
(1) the National Institute of Standards and Technology;
(2) the National Telecommunications and Information Administration;
(3) the National Technical Information Service; and
(4) the Office of Technology Policy."

The new Administration would be headed by an Under Secretary, who "shall
advocate technology and
telecommunications policies at the federal, state, and local level that
promote, among other important benefits, economic growth, job creation,
national security and safety, a strong technology base, and a robust
competitive telecommunications infrastructure."

Secretary Evans (at right)
stated in his cover letter that "This
bill modifies and modernizes the organizational structure of the Department of
Commerce to enhance the formulation of technology, electronic commerce and
telecommunications policy issues."

The National Telecommunications and
Information Administration (NTIA) has spectrum management authority,
domain name management responsibilities, and limited grant making authority.
It also represents the administration on certain communications matters, and
has been assigned by the Congress to write various communications and
e-commerce related studies.

Secretary Evans' Statement of Purpose and Need recites that the e-commerce
policy functions of the International Trade
Administration (ITA) will be transferred to the new unit. However, this is
not referenced in the draft bill. The Statement explains that "No
legislative change is required to merge
the ITA electronic commerce policy functions with the Technology and
Telecommunications Administration as these functions are currently delegated
to ITA by internal Departmental organizational order. The proposed reform will
not impact ITA's responsibilities regarding trade negotiations and promotion
as they pertain to electronic commerce."

The Statement of Purpose and Need states that "The Department of Commerce
currently develops and implements technology, electronic commerce and
telecommunications policy in three bureaus: TA, NTIA, and ITA. To complement
the convergence in the private sector of technology and communications
companies, Secretary Evans is
proposing to reorganize Departmental personnel and management to formalize the
coordination of domestic and international policy development for these
inter-related sectors of the economy. The proposed structure would have the
Under Secretary for Technology and Telecommunications oversee the expanded
bureau."

Secretary Evans originally made this proposal on February 13, 2003. He did
not at that time forward the draft of proposed legislation. See, story titled
"Don Evans Proposes Combining Tech Related Entities at Commerce Department" in
TLJ Daily E-Mail
Alert No. 604, February 14, 2003.

There are other technology and innovation related entities at the DOC that
are not affected by this reorganization, including the
U.S. Patent and Trademark Office (USPTO)
and the Bureau of Industry and Security
(BIS). The BIS administers the export control regime, which grants export
licenses for, among other things, dual use items, such as software and
encryption products, and high performance computers.

Rep. Sherwood Boehlert (R-NY),
the Chairman of the Committee, said in his
opening statement that "Supercomputers help design our cars, predict our
weather, and deepen our understanding of the natural forces that govern our
lives, such as our climate. Indeed, computation is now widely viewed as a third
way of doing science -- building on the traditional areas of theory and
experimentation."

He continued that "maintaining U.S. leadership requires a coordinated, concerted effort by
the federal government. The federal government has long underwritten the basic
research that fuels the computer industry, has purchased the highest-end
computers, and has ensured that those computers are available to a wide range of
American researchers. This Committee has played an especially crucial role in
ensuring access, pushing for the creation of the National Science Foundation
(NSF) Supercomputer Centers back in the early '80s."

Rep. Boehlert stated that "Government action is just as needed now.
But what action? The Department of
Energy is proposing to move away from our reliance on more mass-market
supercomputers to pursue research on massive machines designed to solve
especially complex problems. NSF appears to be moving away from supporting
supercomputer centers to a more distributed computing approach. These policies
need to be examined."

Vincent Scarafino, Manager of Numerically Intensive Computing at Ford Motor
Company, wrote in his
prepared testimony that "Up until the mid 1990's, the Federal government had
helped with the development of high-end machines with faster, more powerful
processing capability and matching memory bandwidth and latency characteristics
by helping to fund development and create a market for them. These machines were
built mainly to meet the needs of government security and scientific research.
Once they were built, there was a limited, but significant application of these
machines in the private sector. The availability of higher capability machines
advanced the application of science in the private sector."

Then, "In the mid 1990's the Federal government decided to rely on utilizing
off-the-shelf components and depend on the ability to combine thousands of these
components to work in harmony to meet its advanced high-performance computing
needs. The result was an advance in the areas of computer science that dealt
with parallel processing. Over the last eight years, some kinds of applications
have adapted well to the more constrained environment supported by these
commodity based machines."

However, Scarafino added that the "hardest problems do not adapt well to
parallel architectures. Either we
don't know enough about the problem to develop a parallel solution, or they are
not parallel by nature."

He stated that the "Federal government cannot rely on fundamental
economic forces to advance
high-performance computing capability", and that the "Federal
government should help with the advancement of high-end processor
design and other fundamental components necessary to develop well-balanced,
highly capable machines. U. S. leadership is currently at risk."

Daniel Reed, Director of the National
Center for Supercomputing Applications (NCSA) at the University of Illinois
at Urbana-Champaign, wrote in his
prepared
testimony [PDF] that "We must change the model for development, acquisition and
deployment of high-end computing systems if the U.S. is to sustain the
leadership needed for scientific discovery and national security in the long
term."

He recommended that "In the short to medium term, we must acquire and continue to
deploy additional high-end systems at larger scale if we are to satisfy the
unmet demand of the science and engineering research community." Also, "we
must fund the design and construction of
large-scale prototypes of next-generation high-end systems that includes
balanced exploration of new hardware and software models, driven by scientific
application requirements."

Peter Freeman of the National Science Foundation wrote in his
prepared testimony that the "NSF remains absolutely committed to providing
researchers the most advanced computing equipment available and to sponsoring
research that will help create future generations of computational
infrastructure, including supercomputers."

"At the same time, we are committed to realizing the compelling vision
described in the report of the NSF Advisory Panel on Cyberinfrastructure,
commonly known as the Atkins Committee -- that ``a new age has dawned in
scientific and engineering research, pushed by continuing progress in computing,
information and communications technology.´´ This cyberinfrastructure includes,
and I quote, "not only high-performance
computational services, but also integrated services for knowledge management,
observation and measurement, visualization and collaboration", said Freeman. See, Atkins Report
Executive
Summary [6 pages in PDF] and full
Report
[3.2 MB in PDF].

The House will meet at 12:30 PM for morning hour and at 2:00 PM for
legislative business. It will consider several items under suspension of the
rules. Votes will be postponed until 6:30 PM. See,
Republican Whip Notice.

The Senate will meet at 1:00 PM. At 1:30 PM it will begin consideration of
HR 2555,
the "Department of Homeland Security Appropriations Act, 2004".

11:00 AM. The Consumer Federation of
America and the Consumers Union will hold a telephone press conference
regarding the Federal Communications Commission's
(FCC) media ownership rules. To participate, call 888 747-3510; the
passcode is 213649. After 2:00 PM, a playback will be available at 888
266-2081; passcode 213649.

Deadline to submit comments to the Federal
Communications Commission (FCC) in response to its Notice of Inquiry (NOI)
pertaining to the possibility of incorporating receiver performance specifications
into the FCC's spectrum policy. This NOI follows the recommendations of the FCC's
Spectrum Policy Task Force (SPTF)
report [PDF] of November 15, 2002. See,
story titled
"FCC Announces NOI Re Receiver Performance Standards" in TLJ Daily E-Mail Alert
No. 624, March 17, 2003. See also,
notice in the Federal Register, May 5, 2003, Vol. 68, No. 86, at Pages 23677 -
23686. This is ET Docket No. 03-65, FCC 03-54. For more information, contact
Hugh Van Tuyl at the FCC's Office of Engineering and Technology (OET) at 202 418-7506 or
hvantuyl@fcc.gov.

Deadline to submit comments to the U.S. Patent
and Trademark Office (USPTO) in response to its
notice in the Federal Register requesting public comments regarding changes
needed to implement a Patent Cooperation Treaty (PCT) style Unity of Invention
standard in the U.S. See, Federal Register, May 20, 2003, Vol. 68, No. 97, at
Pages 27536 - 27539. For more information, contact Robert Clarke at 703 305-9177 or
robert.clarke@uspto.gov.

Deadline to submit comments to the Federal
Communications Commission (FCC) in response to its notice of proposed
rulemaking, released on April 30, 2003, regarding changes to its rules
implementing the FCCs policy to carry forward unused funds from the schools
and libraries universal support mechanism (aka e-rate subsidies) in subsequent
funding years. See,
notice in the Federal Register, June 20, 2003, Vol. 68, No. 119, at Pages
36961 - 36967.

Tuesday, July 22

The House will meet at 9:00 AM for morning hour and at 10:00 AM for
legislative business. It will take up HR __, the "Foreign Operations, Export
Financing, and Related Programs Appropriations Act for Fiscal Year 2004". See,
Republican Whip Notice.

10:00 AM. The Senate Judiciary
Committee will hold a hearing on several pending judicial nominations:
Steven Colloton (U.S. Court of Appeals for the Eighth Circuit), Henry Floyd
(District of South Carolina), Brent McKnight (Western District of North
Carolina), David Proctor (Northern District of Alabama). The hearing may also
include the nomination of Rene Acosta to be an Assistant Attorney General in
charge of the Civil Rights
Division. Press contact: Margarita Tapia at 202
224-5225. This Committee frequently changes the time and agenda of its
meetings without notice. Location: Room 226, Dirksen Building.

3:00 PM. The National
Telecommunications and Information Administration (NTIA) will hold a
public briefing on its creation of a second level domain within the .us
country code domain that is restricted to material that is not harmful to
minors. This is required by the Dot Kids Implementation and Efficiency Act of 2002,
HR 3833
in the 107th Congress, Public Law No. 107-317. This
briefing will provide information about the domain, instructions about
registering a kids.us address, content guidelines and restrictions, and an
overview of the content review process. See,
NTIA
notice, and
notice in the Federal Register, July 17, 2003, Vol. 68, No. 137, at Pages
42401 - 42402. Location: Room 2123, Rayburn Building.

The House will meet at 10:00 AM for legislative business. It may consider
HR 2739,
the "United States Singapore Free Trade Agreement Implementation Act",
HR 2738,
the "United States Chile Free Trade Agreement Implementation Act",
and/or HR __, the "Departments of Commerce, Justice, and State, the
Judiciary, and Related Agencies Appropriations Act for Fiscal Year 2004".
See, Republican Whip
Notice.

9:00 AM. Day one of a two day meeting to the
Bureau of Industry and Security's
(Bureau of Export Administration) Information Systems Technical Advisory
Committee. Part of the meeting will be closed to the public. The agenda
includes discussion of export controls on signal generators and arbitrary
waveform generators, discussion of developments in micro-processors technology
and export controls, discussion of proposal on encryption in network
management, election of a new chairman, and secret matters. See,
notice in the Federal Register, July 8, 2003, Vol. 68, No. 130, at Pages
40626 - 40627. Location: Room 3884, Hoover Building, 14th St. between
Pennsylvania Ave. and Constitution Ave., NW.

9:00 AM. The Senate Judiciary
Committee will hold an executive business meeting. Press contact:
Margarita Tapia at 202 224-5225. This Committee frequently changes the time
and agenda of its meetings without notice. Location: Room 226, Dirksen Building.

2:00 PM. The Senate Judiciary
Committee will hold a hearing on the nominations of Rene Acosta to
be an Assistant Attorney General in charge of the
Civil Rights Division,
and Daniel Bryant to be an Assistant Attorney General in charge of the
Office of Legal Policy. Press contact:
Margarita Tapia at 202 224-5225. This Committee frequently changes the time
and agenda of its meetings without notice. Location: Room 226, Dirksen Building.

The House will meet at 10:00 AM for legislative business. It may consider
HR 2739,
the "United States Singapore Free Trade Agreement Implementation Act",
HR 2738,
the "United States Chile Free Trade Agreement Implementation Act",
and/or HR __, the "Departments of Commerce, Justice, and State, the
Judiciary, and Related Agencies Appropriations Act for Fiscal Year 2004".
See, Republican Whip
Notice.

9:00 AM. Day two of a two day meeting to the
Bureau of Industry and Security's
(Bureau of Export Administration) Information Systems Technical Advisory
Committee. Part of the meeting will be closed to the public. The agenda
includes discussion of export controls on signal generators and arbitrary
waveform generators, discussion of developments in micro-processors technology
and export controls, discussion of proposal on encryption in network
management, election of a new chairman, and secret matters. See,
notice in the Federal Register, July 8, 2003, Vol. 68, No. 130, at Pages
40626 - 40627. Location: Room 3884, Hoover Building, 14th St. between
Pennsylvania Ave. and Constitution Ave., NW.

7/18. The U.S.
Court of Appeals (9thCir) issued its
opinion [14 pages in PDF] in Scholastic
Entertainment v. Fox, analyzing whether a case involving
interdependent copyright and contract claims "arises under" the federal
copyright laws for the purposes of 28 U.S.C. § 1338(a). The Appeals Court,
following its precedent in T.B. Harms and other cases, affirmed the
District Court's dismissal of the case for lack of subject matter jurisdiction.

Scholastic Entertainment makes and markets movies, TV, and video
programming based on children's literary works. It entered into a contract with
Fox Broadcasting Company (FBC) under which it agreed to produce a TV series
based on the Goosebumps children's
books, and to license the rights to exhibit and distribute the shows to Fox
Broadcasting Company. The Appeals Courts wrote that "Fox was to air the initial
exhibition of the shows on Fox Broadcasting and later distribute the series to
other television outlets for a period of 15 years. In addition to the original
exhibition fees, Scholastic was entitled to a portion of the profits made during
the distribution phase."

Scholastic made 62 half hour TV programs and six one hour specials. Fox paid an
initial exhibition fee of approximately $33
Million. Later, Scholastic learned that the Fox Family Channel (FFC),
which was not a party to the contract, was airing the Goosebumps series.
Neither FFC nor FBC compensated Scholastic for this.

Scholastic claimed that it was owed at least $2.7 Million as a result of the
FFC airings because they constituted a distribution under the agreement. Fox
claimed that the FFC airings were exhibitions for which Scholastic was not
entitled to additional licensing fees.
Eventually, Scholastic sent a letter terminating the contract. However, it
stipulated that it would not relicense the programs to third parties

Scholastic filed a complaint in U.S. District Court (CDCal)
against FBC, FFC, and other Fox entities alleging that the contract had been
effectively terminated and that the ongoing use of the Goosebumps series
constituted copyright infringement. The District Court dismissed the complaint.

The Appeals Court summarized the issue. "Scholastic and Fox entered into a contract, the
subject matter of which was the copyright protected television series
Goosebumps. Upon learning of material breaches by Fox as a result of the FFC
airings, Scholastic terminated the agreement. Scholastic's termination, if
effective, would cause the reversion of all ownership rights to Scholastic,
rendering Fox's continuing use of the series copyright infringement. Fox, on the
other hand, claims that the contract is still in effect and that, pursuant to
the agreement, it alone has the right to exhibit and distribute the series.
Because Scholastic has stipulated that it will not relicense the Goosebumps
series until a determination is made as to the status of the agreement,
however, Scholastic cannot be guilty of copyright infringement. Therefore, this
case hinges entirely on whether Scholastic's attempt to terminate the agreement
was successful."

28 U.S.C.
§ 1338(a) provides that "The district courts
shall have original jurisdiction of any civil action arising under any Act of
Congress relating to patents, plant variety protection, copyrights and
trademarks. Such jurisdiction shall be exclusive of the courts of the states
in patent, plant variety protection and copyright cases." In contrast,
contract law is a matter of state law.

The Appeals Court wrote that "Federal courts have consistently dismissed complaints in
copyright cases presenting only questions of contract law."

It then applied the test outlined in
T.B. Harms Co. v. Eliscu, 339 F.2d 823 (2d Cir. 1964). It described this as
"the majority rule".

The Court wrote that "the T.B. Harms test requires the district court to
exercise jurisdiction if: (1) the complaint asks for a remedy expressly granted
by the Copyright Act; (2) the complaint requires an interpretation of the
Copyright Act; or (3) federal principles should control the claims."

The Appeals Court applied this test, and concluded that "subject matter
jurisdiction is lacking and
that the district court did not violate Fox's due process rights by
sua sponte dismissing the claims. Once
Scholastic's claims were dismissed, the only remaining issue was the validity of
the termination. Scholastic's success in terminating the agreement is a pure
question of state contract law appropriate for adjudication in the California
courts."

Global Naps is a competitive local exchange carrier (CLEC) in New York and
New England. Verizon is the incumbent local exchange carrier (ILEC) in this region.
Global Naps and Verizon had a dispute over reciprocal compensation. Global
Naps filed an administrative complaint with the New York Public Services Commission.

In a separate lawsuit, Verizon filed a complaint in U.S. District Court (EDNY)
against Global Naps alleging nine causes of action relating to Global Naps
billings for reciprocal compensation, including violations of the Telecom Act,
the Massachusetts Deceptive Trade Practices Act, breach of contract, unjust
enrichment, and violation of RICO.

In the RICO count Verizon alleged that Global NAPs' prosecution of its
administrative complaint before the New York PSC was a "predicate act"
supporting RICO liability. It alleged that "Defendants' prosecution and
maintenance of the New York PSC proceeding relating to the number of MOUs
involved was itself a fraud, designed to confuse Bell Atlantic and conceal the
nature of Defendants' racketeering activity." Verizon did, however, plead
malicious prosecution.

In the present lawsuit, Global Naps filed a complaint in
U.S. District Court
(DMass) against Federal Insurance Company seeking reimbursement under the policy
of litigation expenses incurred defending Verizon's lawsuit.

The District Court granted summary judgment to Federal Insurance Company on
the issue of coverage. The Appeals Court affirmed.

7/18. President Bush announced his intent to nominate Peter Lichtenbaum to be
an Assistant Secretary of Commerce for Export Administration. He is currently a partner
in the Washington DC office of the law firm of Steptoe & Johnson. See,
White
House release.

7/17. William Aylesworth, CFO of Texas
Instruments (TI), will retire at the 2003. He will be replaced by Kevin
March, TI's Controller. See,
TI release.

7/17. TI named Richard Templeton to its Board of Directors. He is
TI's Chief Operating Officer. See,
TI
release.

More News

7/18. PeopleSoft and J.D. Edwards announced that
"PeopleSoft has purchased approximately 110 million shares, or 88% of the
outstanding shares of J.D. Edwards pursuant to its exchange offer
to acquire all of the outstanding shares of J.D. Edwards that
expired at 12:00 midnight EDT, Thursday, July 17, 2003. PeopleSoft
expects to acquire the remaining shares of J.D. Edwards before the
end of August 2003. The companies also announced that Michael Maples, a member
of J.D. Edwards' board of directors, was elected to the board of
directors of PeopleSoft." See, J.D. Edwards
release
and PeopleSoft
release.

7/18. A collection of interest groups sent a
letter to
Representatives and Senators regarding pending spam legislation. The
signatories, which include the Electronic Privacy
Information Center (EPIC) and the
Consumer Federation of America (CU), argue that several items elements
should be included in any spam bill. For example, they want legislation to
define spam as "unsolicited, bulk, commercial email." Also, they support
establishing an opt-in rule, rather that an opt-out rule, as is provided for in several
pending bills. They write that "The rule for bulk, commercial emails should be
that they can only be sent with the recipients' prior affirmative agreement,
with an exception for previously existing business relationships." They also
advocate allowing a private right of action: "Individuals as well as ISPs should
have the legal right to bring action against spammers. This the approach that
Congress took with telemarketers and junk faxes and it is the approach that has
been taken in the states to address the spam challenge. Depriving individuals of
the right to seek legal action weakens consumer rights and leaves too much
discretion to government agencies." However, the letter does not address class
actions. The letter also opposes federal preemption.

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